Will US rejoin Trans Pacific Partnership to support its economy?

When the U.S. withdrew from it, the remaining members of the Trans-Pacific Partnership have finalized a new version of the trade deal, which retains most of the original provisions. In September 2021, China offered to join the Trans-Pacific Partnership. It put pressure on the US to renegotiate the deal. The concept behind the Trans-Pacific Partnership was sparked by a 2005 trade agreement between some of the Pacific Rim countries, which included Chile, Singapore, Brunei, and New Zealand. In 2008, the US started negotiations for the Trans-Pacific Partnership, which includes Australia, Chile, Peru, and Vietnam. In 2009, the US started negotiating the Trans-Pacific Partnership (TPP). In 2011, the Obama administration stated that the agreement would serve as a cornerstone of the US' strategy to expand its presence in the Asia-Pacific region. After almost two years of negotiating, the various countries that signed the pact concluded their negotiations in 2015. These negotiations were held despite significant political obstacles. Some countries, such as Japan, resisted the changes proposed by the other nations. Canada, Malaysia, and Vietnam agreed to liberalize their dairy markets, while the U.S. gave in to some of its demands for more patent protection for drugs. The Trans-Pacific Partnership (TPP) was never ratified by the US Congress. This agreement was a target of both the Democratic and Republican presidential candidates during the 2016 election.

What did the parties agree to? The text included several chapters dealing with various aspects of international trade, including intellectual property rights, rules for international trade, and many other topics. The Trans-Pacific Partnership was a mega-deal that aimed to create a fully integrated economy with rules that apply globally. For Obama, the agreement was a way to ensure that the US would be the one writing the rules for the global economy.

Below are some of the prominent provisions included:

·        The Trans-Pacific Partnership Agreement lowered or eliminated trade barriers on a wide range of goods. Some of these included many automobile and apparel products, as well as various agricultural commodities.

·        The liberalization of services trade. There were no restrictions on cross-border services, and rules were added to ensure that they are not discriminatory.

·        The rules for investment were opened to foreign investors. They also included rules designed to protect investors from being treated unfairly.

·        The e-commerce guidelines in the Trans-Pacific Partnership (TPP) were the first of their kind, and they would have ensured the free flow of information across borders.

·        The IP deal included various provisions that protect intellectual property rights. It also included new protections for drugs and biotechnology.

·        The Trans-Pacific Partnership (TPP) included labor and environmental standards that were more stringent than previous trade deals.

·        Other key provisions included rules designed to prevent monopolies and state-run enterprises, and regulations that make it easier for small businesses to trade across the border.

Deal benefits to the U.S.: For the US, the Trans-Pacific Partnership was meant to be a way to pursue both economic and diplomatic interests in Asia. Supporters of the deal argued that it would have created jobs and boosted US exports. Developing countries should implement market-oriented reforms that will boost their economies' productivity and growth, said officials from the World Bank and the Asian Development Bank. The Trans-Pacific Partnership would have been the biggest trade agreement ever completed by the US. It would have made up about 40 percent of the global gross domestic product. The US exported more than $1.5 trillion worth of goods to TPP countries in 2015. The United States has already had free trade agreements with other countries, such as Australia and Canada. However, during the time of the Trans-Pacific Partnership, Japan was not included. In 2019, the US and Japan concluded a limited bilateral trade deal. The agreement, which became known as the Trans-Pacific Partnership, is expected to provide the US with significant advantages.

Various studies have estimated that the Trans-Pacific Partnership would boost the US economy by $130 billion to $200 billion annually by 2030. However, some of these models showed mixed effects on employment. For its geostrategic value, the administration argued that the TPP would strengthen the US’ presence in Asia and boost its allies in the region. In 2011, Secretary of State Hillary Clinton said that the Trans-Pacific Partnership would help boost Asian integration efforts. It would also help the US lead the global trade rules. Through the Trans-Pacific Partnership, analysts say, the US can provide deeper economic reforms and higher standards in exchange for participating in the deal. While Trump has made addressing China’s trade-disruptive policies a central part of his administration, experts say that pulling out of the Trans-Pacific Partnership weakened the US’ leverage in dealing with Beijing. For its part, China pushed for a separate trade agreement that would involve more than a dozen Asian countries.

The RCEP is a free trade area between China and 11 other countries. It was signed in November 2020. The agreement doesn’t go as far as the Trans-Pacific Partnership, and it doesn’t address many of the issues that were addressed in the previous deal. Also, India withdrew from the agreement. Still, the RCEP is still very different from the Trans-Pacific Partnership, which is also a major trade bloc. The Trans-Pacific Partnership and the Korea Free Trade Agreement are two mega deals that will create more integration within the region, experts say.

What made opposition to the TPP? The Trans-Pacific Partnership was the target of many political attacks during the 2016 presidential election. President Donald Trump criticized the US-Mexico-Canada Agreement (MCA) for years, claiming that it would increase the country's trade deficit and push more jobs overseas. Some Democratic presidential candidates agreed with this prognosis, including Hillary Clinton and Bernie Sanders. Although Clinton had pushed for the Trans-Pacific Partnership during her time as secretary of state, she had also opposed it as a part of Obama’s pivot to Asia. Many labour groups in the US opposed the Trans-Pacific Partnership (TPP). They argued that the deal would hurt workers' wages and lower standards. Trump has criticized the North American Free Trade Agreement since it was signed. He claimed that it would boost manufacturing jobs in the US. Critics, however, maintained that the deal would allow corporations to exert too much power over domestic policies. Many pro-TPP economists acknowledge that expanded trade can have negative effects on the economy. For instance, it has increased inequality by allowing more people to earn more than they do. They also argue that the decline in manufacturing jobs is largely due to the rise of new technologies and the decline of old industries.

Commencement of CPTPP or the changes to TPP: After US President Donald Trump withdrew from the Trans-Pacific Partnership, the remaining 11 members of the agreement continued to negotiate. Through their efforts, the Trans-Pacific Partnership was concluded in March 2018. The CPTPP agreement will remove trade barriers between the countries of the region. The new Trans-Pacific Partnership has many differences from the original deal. Experts say that its many changes make it harder to implement. The biggest change in the patent system was Washington's insistence on longer copyright terms and automatic patent extensions. This was among the changes the US pushed for in the Trans-Pacific Partnership. The ISDS provision was also modified. Some of the rules on environmental and labor issues were also relaxed. Members of the CPTPP insist that the provisions are only suspended, which means they could be reinstated if the US decides to rejoin.

Conclusion

The CPTPP was explicitly written to expand. For instance, South Korea was once seen as a future member of the group. More recently, Thailand, Colombia, and Taiwan have expressed interest in joining. The text of the agreement explicitly stated its intention to expand. China joined the deal in September, which could have brought the country into the pact. China’s move to acquire submarines came shortly after the US announced plans to sell the weapons to Australia and the UK. The Trump administration’s moves are a bet that will pay off in the long run and that could draw other nations closer to China. China’s accession to the CPTPP is far from certain, and it could take years to negotiate its way into the agreement. Its state-led economic structure would need significant changes to follow the terms of the agreement (TPP). The future of the U.S. is uncertain. Even though former Vice President Joe Biden supported the Trans-Pacific Partnership, he noted that it could have been a mistake. US Vice President Joe Biden said he would try to renegotiate the free trade agreement with China if it included stronger environmental and labour standards. Jay Cutler says the US is not ready to pull out of the Trans-Pacific Partnership despite President Joe Biden's statements. He says the country will take time to analyze its position on trade. He adds that although many countries would welcome a return to the negotiating table, they would likely not commit to a major renegotiation. As the US works to restore its international credibility, it cannot afford to cede its place to China in the global marketplace.

Pic Courtesy-Ian Taylor at unsplash.com

The views expressed are those of the author and do not represent views of CESCUBE.)